Tiresias : Pricing

“Price is what you pay. Value is what you get”

Warren Buffett

My friends,

In the last several months, since April, Optiscan has released a number of announcements which have changed the entire landscape and opened vistas which we could previously only dream of. Of these, the joint venture with the Mayo Clinic was preeminent which changed everything. Because of the news-flow from the company, Tiresias’s commentary has of necessity been related to technological and medical issues. He has not deliberately ignored market action or market price, which is of course important to all of us. Although the share price has risen in the last four months, in Tiresias’s opinion, this is but a little blip. People rightly ask, well if Optiscan is such a revolutionary technology; “why is the price not higher?”; “Why is the capitalization still very low?”. Tiresias sees many reasons which he wishes to expound on, and in this epistle today, he will make a start in addressing, but today it will be but a start. Tiresias asks for patience from his friends that hopefully they may, at the end, remain sanguine as Tiresias, about the daily prices.

As is his want, Tiresias would like to begin with a paradox. Tiresias sees that Optiscan does not need more money currently. Paradoxically this, Tiresias considers, is one of the reasons that there is less upward price pressure than there otherwise would be. Optiscan has two major cornerstone investors with very deep pockets, and patience, the Clermont Group and Peters Investments. The company has received recently 3-million-dollar government grant, and of course has a modest revenue stream and therefore has a healthy cash balance. So why should this act as a barrier to further price rise. Well, my friends, one must look beyond the actual daily share-price action and what influences the daily fluctuations. One must understand what the present stock market is about and how it works. One must understand the changed role of stockbrokers and investment funds in the pricing matrix. You see, my friends, the stockbrokers now hardly obtain any money from standard trading. The fees for trading now are wafer thin and very slim pickings indeed. They are not interested in getting behind a company or recommending a buy of a low capitalization stock buy on the market. There are far too many for very low returns for this now obsolete model of broking. The ASX, ASIC, their own broking house, their compliance departments, the clients, and their veritable batteries of lawyers are only too ready to blame them for any mishap, even if it hasn’t happened. This risk is certainly not compensated by the poultry broking fees that they now receive. As a result of most people trading now trade on their own accounts on their own online accounts the brokers have moved into a whole new business model. Many have become (and Tiresias cannot restrain a groan here) “Wealth Managers” and spruik for funds at much fatter fees for talking their aging clients to put their superannuation into their cares for much fatter fees with no risk to them. The other fat fees come from capital raisings. These “brokers” are not interested in companies who don’t need money now. They are interested in companies who need raisings. This is where they make their killings. The fees are much better, much much better, and little work is involved. they will charge 6% up to 10% for raising and for underwriting or for finding under-writers. When they hear of a company that might be of interest, the first thing they want to know is do they need a raising. If not, most of them move on. Having attention deficits, the intelligences lower than the room temperature, they will hardly recommend or market medical technology company which they cannot possibly understand. So, you see my friends, this is how a well-funded company with strong cornerstone investors and cash in the balance is ignored by the stockbroking community. But there is always some natural selling, but a major part of selling comes largely from algorithmically driven day traders and the necessary buying and selling that occurs for reasons completely removed from the company itself.

This is but one example of why the price is “stabilised” at this level and why, we may ask ourselves, and is this all there is? Well, Tiresias is certain that this is not all there is. Tiresias sees and feels there is a lot more. And whilst we await further developments and news flows, which may interrupt his plans to discuss the market, plans to address the other reasons which he considers contribute to this slight pause in the rise in Optiscan’s price rise, of which Tiresias has no doubt is but a pause.

Until next week